Sotheby's: Meaning, Business Units, History

What Is Sotheby's?

Sotheby's is one of the world's largest auction houses and brokers of art, collectibles, jewelry, and real estate. Founded in England and headquartered in New York City, Sotheby's is organized into three separate business units: finance, auctions, and dealing. It also offers a number of related services, such as private sales and corporate art services.

Understanding Sotheby's

Sotheby's acts as a market for the exchange of rare and valuable items for which there are few other ways of buying and selling. Because of the rarity of many of the items, the market for them is very illiquid. Sotheby's provides a way for investors and collectors to liquidate their holdings. Huge swings in valuation are common because gemstones, fine art, and antiques are worth whatever a buyer is willing to pay for them at the time they are sold.

Christie's is considered the main rival of Sotheby's. In September 2000, the two auction houses agreed to pay $512 million to settle claims that they had engaged in a price-fixing scheme since 1992.

Sotheby's makes money by charging commissions on sales for art and other assets within its portfolio. Purchasers pay a "buyer's premium", which vary based on the sale amount of the piece. As of 2022, the auction house charged 25% of the hammer price for assets worth up to $1 million; 20% for assets priced between $1 million and $4 .5million, and 13.9% for assets priced above $4.5 million. Sotheby’s standard seller’s commission, meanwhile, is 10% of the hammer price.

A significant part of Sotheby's business is private transactions—rather than public auctions. The company has a hand in art galleries and helping dealers finance purchases. It also engages in private sales via partnerships with dealers.

Sotheby's Business Units

One of its more profitable units is Sotheby's Financial Services, which provides loans on consigned items as well as term loans using property as collateral, something traditional banks are less likely to do.

Other divisions include Sotheby's Corporate Art Services, which helps corporations build and value their own art collections, iCollect, a cloud-based collection management system, Museum Services, Sotheby's Picture Library, Sotheby's Cafe, Fine Art Storage, and Valuations.

Sotheby's also assists on tax and legal aspects of items it handles, as well as help beneficiaries, executors, and other fiduciaries with handling estate and trust issues related to collections.

Sotheby's History

Sotheby's, named after its co-founder John Sotheby, has been in operation since 1744. It started as a dealer of rare and valuable books and, before going private in 2019, was the oldest listed company, though not the longest listed, trading on the New York Stock Exchange (NYSE).

With the opening of its New York auction house operations in 1955, Sotheby's became the world's first international auction house. It became a U.K. public company in 1977, before going private in the early 1980s and then public again in 1988 in the U.S. as Sotheby's Holdings, Inc. After Patrick Drahi's takeover in 2019, the company has once again gone private.

As of 2021, Sotheby's has 80 offices in 40 countries, nine salesrooms around the world, and private sales galleries in New York, Hong Kong, and London. The company conducts approximately 250 auctions per year in over 70 different categories, with its BidNow program allowing bidders to view all items and auctions online in real-time.